Chrysler More Than Doubles Original Cost-Cutting Target
DETROIT (AP) _ Chrysler Corp., struggling with sagging sales and high incentive costs, has increased its target for a cost-cutting program to $2.5 billion.
In July 1989, Chrysler Chairman Lee Iacocca announced plans to trim $1 billion from the automaker’s $26 billion yearly budget by the end of 1990. Chrysler has cut about 2,500 of its 28,700 white-collar jobs since last October, spokesman Steve Harris said Tuesday.
Since the cost-cutting plans were announced, executives have raised the target twice, first to $1.5 billion by the end of this year, and now to $2.5 billion by next June, Iacocca said in an interview with The Wall Street Journal.
″Some tentative targets ware being talked about,″ Harris said Tuesday. ″We haven’t formalized that yet or put the program in place. That is a tentative target that he (Iacocca) is looking at.″
Harris said product-development plans would be exempt from any new round of cuts.
″Anything having to do with the product or customer satisfaction is in tact,″ he said.
Industry observers generally agree that Chrysler badly needs to introduce a new mid-size sedan as soon as possible to freshen its lineup. The next such car is code-named ″LH″ and is due in dealerships in late 1992 as a 1993 model.
Also on Tuesday, Chrysler tacked seven months onto the life of its St. Louis car plant, which employs about 2,300 workers. Chrysler had set tentative closing dates for the 1 plant first for Sept. 21, then for Nov. 9.
Company spokesman Alan Miller said the factory now is due to close May 24, at the end of production for the 1991-model Dodge Daytona and Chrysler LeBaron coupe and convertible cars. Daytona production will be moved to Sterling Heights, Mich., and LeBaron production is to transfer to Newark, Del.
Chrysler’s sales this year have been slumping. Through the first seven months of 1990 the company sold about 1.04 million cars and light trucks, down 15.5 percent from last year.
Iacocca said in the Journal interview that the cost cutting prevented Chrysler from going into the red during the first half of this year. The company made $251 million during the first six months of 1990, 64 percent less than it made during the same period last year.
Part of the reason for the decline in profits has been Chrysler’s continued heavy use of incentives to prop up sales. Company officials have said incentives cost Chrysler more than $1,000 for every vehicle sold.
Wall Street analysts and Chrysler executives expect the company will lose a substantial amount of money in the third quarter, mainly because of production interruptions at its two profitable minivan plants. The two factories were shut down for four weeks apiece for retooling for 1991 models.